The New Age of Procurement and Supply ... CIPS Event

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The New Age of Procurement and Supply ... CIPS Event

  1. 1. CONFIDENTIAL Supply Chain Risks … Sharing some insights THE NEW AGE OF PROCUREMENT AND SUPPLY 14 MAY 2014 Partner logo (cannot be bigger than the MBS logo) Peter Woon Vice President, Procurement & Supply Chain Marina Bay Sands Pte Ltd
  2. 2. CONFIDENTIAL PRESENTATION TAKEAWAYS … Intro to MBS New expectations from CPO Supply Chain Risk Overview Supply Chain Resilience Study – Key Findings Risk Management Frameworks and Industry examples Summary
  3. 3. CONFIDENTIAL THE VENETIAN USA, LAS VEGAS (1999) THE VENETIAN  MACAO (2007) MARINA BAY SANDS  SINGAPORE (2010) LAS VEGAS BETHLEHEM MACAO SINGAPORE SANDS COTAI CENTRAL MACAO (OPENING  APRIL 2012) A Global Approach To Doing Business…
  4. 4. CONFIDENTIAL OUR CUSTOMERS • > 2500 Rooms, Largest Hotel in Singapore Hotel • Mall Mgt., 20 F&B Establishments Retail Mall + F&B • > 600 Tables , 1500 SlotsCasino • 2 Theatres and a MuseumEntertainment • 1.3 Million sq. ft. of meeting space , Asia’s Best MICE Hotel MICE © 2012 Marina Bay Sands PTE LTD
  5. 5. CONFIDENTIAL PRESENTATION TAKEAWAYS … Intro to MBS New expectations from CPO Supply Chain Risk Overview Supply Chain Resilience Study – Key Findings Risk Management Frameworks and Industry examples Summary
  6. 6. CONFIDENTIAL Tim Cook, Apple WHAT DO THESE CEOS HAVE IN COMMON? Sam Walsh, Rio Tinto Mark Selway, Boral Their previous role: Chief Procurement Officers © 2012 Marina Bay Sands PTE LTD
  7. 7. CONFIDENTIAL THE IMPORTANCE OF PROCUREMENT ON THE BOARD LEVEL © 2012 Marina Bay Sands PTE LTD Source: Reinecke/Schmidt 2010, www.brw.com.au/p/lists/best_places_to_work/procurement_officers_forge_path_lxPHbMEj84WKm9fYkRTYXJ 1DJ30 & DAX30, 2Forbes 500 28% 70% 98% 0% 20% 40% 60% 80% 100% Marketing (CMO) Procurement (CPO) Finance (CFO) Positions represented on global companies’ boards 1 1 2
  8. 8. CONFIDENTIAL CHANGING EXPECTATIONS  CEOs expectation from the Procurement Function Then Now Cost Savings Risk Management & Compliance Innovative Procurement Product Dev. Sustainability
  9. 9. CONFIDENTIAL PRESENTATION TAKEAWAYS … Intro to MBS New expectations from CPO Supply Chain Risk Overview Supply Chain Resilience Study – Key Findings Risk Management Frameworks and Industry examples Summary
  10. 10. CONFIDENTIAL “DILBERT’S MANAGEMENT 101 : RISK ANALYSIS” “DILBERT’S MANAGEMENT 101 : RISK MANAGEMENT” wow
  11. 11. CONFIDENTIAL ENTERPRISE VULNERABILITY – KNOWN RISKS Loss of Key Personnel Restriction of Access / Egress 3PL Failures Dealer Distribution Network Failures Computer Virus / DOS Attacks IT System Failures: Hware, Sware, LAN, WAN Service Provider Failures Harassment & Discrimination Loss of Key Equipt Tier 1, 2, 3, …n Supplier Problems Warranty / Product Recall Campaigns Logistics Route Disruptions KidnappingExtortion Vandalism Arson HR: Skill Shortage, Turnover Loss of Key Supplier Accounting or Internal Controls Failures Embezzlement Gov’t Inquiries Theft Operator Errors / Accidental Damage Workplace Violence Health & Safety Violations Utilities Failures: Comms, Electricity, Water, Power Revenue Management Equip., Facilities, Business Acquisitions & Divestitures Asset Valuation Liquidity / Cash Debt & Credit Rating Fuel PricesInterest Rate Fluctuations Currency & Foreign Exchange Rate Fluctuations Accounting / Tax Law Changes Economic Recession Currency Inconvertibility Credit Default Uncompetitive Cost Structure Financial Markets Instability Inadequate / Inaccurate Financial Controls & Reporting Health Care & Pension Costs Shareholder Activism Adverse Changes in Industry Regulations Adverse Changes in Environmental Regulations Boiler or Machinery Explosion Property Damage Bldg. or Equip Fire Building Collapse Asbestos Exposure Mold Exposure Cargo Losses Land, Water, Atmospheric Pollution Geopolitical Risks Severe Hot / Cold Weather Disease / Epidemic Animal / Insect Infestation Blizzard / Ice Storms Hail Damage Lightning Strikes Earthquake Flooding Wildfire Hurricane / Typhoon Heavy Rain / Thunderstorms Tsunami Volcano Eruption Wind Damage 3rd Party LiabilityGeneral Liability Product Liability Directors & Officers Liability Workers Compensation Deductible Limits Terrorism / Sabotage Tornados Loss of Key Facility Customer Relations Corporate Culture Cost Overruns “Gotta-have” products Attacks on Brand Loyalty Public Boycott & Condemnation New or Foreign Competitors Market Share Battles Joint Venture / Alliance Relations Price Wars Ineffective Planning Union Relations, Labor Actions Demand Seasonality & Variability M&A Industry Consolidation Perceived Quality Inadequate Mgt Oversight Negative Media Coverage Product Design & Engineering NPI Dealer Relations Technology Decisions Product Dev Process Supplier Relations Foreign Market Protectionism Ethics Violations Offensive Advertising Loss of Intell Property Enterprise Vulnerability Financial Risk Hazard Risk Strategic Risk Operations Risk IT System Failures (Hardware, Software, LAN, WAN) Harassment & Discrimination Warranty / Product Recall Campaigns Extortion Info. Mgmt. Problems Loss of Key Supplier Accounting or Internal Controls Failures Fuel Prices Interest Rate Fluctuations Accounting / Tax Law Changes Economic Recession Credit Default Uncompetitive Cost Structure Adverse Changes in Industry Regulations Property Damage Bldg. or Equip. Fire Mold Exposure Cargo Losses Earthquake Flooding Wind Damage Deductible Limits Customer Relations Pricing & Incentive Wars Customer Demand Seasonality & Variability Mergers & Industry Consolidation Product Design & Engineering Dealer Relations Technology Decisions Product Development Process Foreign Market Protectionism Ethics Violations Loss of Intel. Property Fuel Prices Economic Recession Health Care Costs Bldg Fire Credit Default Liquidity/Cash Facility Loss Product Liability Cargo Losses Earthquake Wildfire Epidemic Tornados Ice Storm Tax Law Changes Theft Utility failure Key Supplier Loss Logistics Route Failure IT Failure Personnel Loss Health & Safety Violations Workplace Violence Denial of Service Attack New Competition Negative Media M&A/Industry Consolidation Foreign Mkt Protectionism Labor RelationsPerceived Quality Technology Choices Mkt Share Battles Ethics Violation Loss of IP Interest Rate Fluctuations Ref: Dr. Debra Elkins, General Motors
  12. 12. CONFIDENTIAL 1. Risk Identification 2 2. Determine Risk Exposure 3. Prioritize Risks 4. Risk Reduction 5. Risk Acceptance 6. Risk Review and Monitoring Supplier Risk Framework .. Formal approach © 2012 Marina Bay Sands PTE LTD Risk Triggers •Economic Meltdown •Regulatory Changes Risk Classes Financial (Material) Business Impact •Supplier bankruptcy leading to Disruption to Operations and sales Risk Triggers •Supplier Bankruptcy •Political Instability •Legal Issues •Environmental Hazard Risk Triggers •Supplier non- compliance •Operational Breakdown Reputational (Qualitative) Business Impact •Supply out of Stock • Operations breakdown Business Impact •Dilution of Brand •Indirect Impact on sales Operational (Material) Risk Assessment Tools Business Impact Assessment tool Prioritization Matrix & Risk register RACI control Matrix Risk Committee Protocol RACI Review Process
  13. 13. CONFIDENTIAL SUPPLY CHAIN DISRUPTIONS ARE COSTLY Japan earthquake Thailand Floods
  14. 14. CONFIDENTIAL SUPPLY CHAIN DESIGN CASE : NOKIA VS ERICSSON Problem: – March 2000, two companies – Nokia and Ericsson – sole source supply of Radio Frequency Chips (RFCs) used in mobile phones from same supplier, Philips Electronics in New Mexico – Philips experienced a 10-minute fire in their New Mexico plant that resulted from a lightning strike; fire was in clean room and while the fire was limited the damage was not – production capacity was lost and ability produce chips lost; Not enough chips to satisfy the demand – Philips did not tell suppliers, when asked described it as 10 min fire – Both companies heavily dependent on RFCs, and Nokia launching new phones dependent upon the RFCs in question. Action: – Nokia early warning system indicated drop in receipts below target level; this alerted them to double-check with Philips about impact of the ‘10-min fire’ – Nokia also had multiple points of contact, was able to identify the real impact of the fire – all inventory lost! – Nokia sprang into action: – Bad news travels fast – Cross-model tradeoffs, Chip re- design – Nokia & Philips to “co-create strategy” – Philips resources stretched to add RFC capacity Result – Ericsson estimated $250M+ loss, Nokia gains mkt share – Ericsson exits the mobile phone production business
  15. 15. CONFIDENTIAL PRESENTATION TAKEAWAYS … Intro to MBS New expectations from CPO Supply Chain Risk Overview Supply Chain Resilience Study – Key Findings Risk Management Frameworks and Industry examples Summary
  16. 16. CONFIDENTIAL Image here (Do not overlay image over the bottom MBS template bar) Data obtained in the last five editions of the Supply Chain Resilience survey. This report seeks to answer recurring questions from each of the five surveys: – What are the causes of supply chain disruption? – Where does supply chain disruption originate? – What are the consequences of supply chain disruption? – Do organisations have business continuity (BC) arrangements to deal with supply chain disruption? If so, what are these? Over 2,100 responses have been collected in this survey over five years, making it one of the most comprehensive studies of supply chain risk available. A summary follows below (Table 1). SUPPLY CHAIN RESILIENCE STUDY (2009 – 2013 SURVEYS) ** Source : BCI Report by Patrick Alcantara @ BCI
  17. 17. CONFIDENTIAL KEY FINDINGS #1 : FREQUENCY OF DISRUPTIONS • Whilst 64.4% of organisations record disruptions in their supply chains in 2013, a 5.6% increase since 20105, many still fail to coordinate on a firm-wide basis. • Worse, on average, more than one-third of organisations do not track incidents at all (Figure 1) ** Source : BCI Report by Patrick Alcantara @ BCI • 78.6% of organisations report experiencing at least one incident involving their supply chains in a given year. However, 68.2% do not have full visibility of their supply chain disruption levels due to a lack of firm-wide reporting. (Figure 2)
  18. 18. CONFIDENTIAL KEY FINDINGS #2 : ORIGIN OF DISRUPTIONS • 60% of organisations report experiencing disruptions occurring at Tier 1 of their supply chains. Meanwhile, a growing number (10% in 2013) report disruptions at Tier 3 or lower. ** Source : BCI Report by Patrick Alcantara @ BCI
  19. 19. CONFIDENTIAL KEY FINDINGS #3 : TOP 3 CAUSES OF DISRUPTION • Unplanned IT and telecom outages, as well as adverse weather, outsourcer service failure continue to be the top sources of supply chain disruption for the last five years. ** Source : BCI Report by Patrick Alcantara @ BCI
  20. 20. CONFIDENTIAL KEY FINDINGS #4 : CONSEQUENCE OF DISRUPTION • Loss of productivity (52.0%), the increased cost of working (38.7%) and impaired service outcomes (34.4%) are the top ranked consequences of supply chain disruption on average. ** Source : BCI Report by Patrick Alcantara @ BCI • However, a growing concern over reputational damage is noticed in the data (20.8%)
  21. 21. CONFIDENTIAL KEY FINDINGS #5 : ECONOMIC IMPACTS OF DISRUPTION • Whilst 87% of organisations on average report losses of less than €1 million annually due to supply chain disruptions, 2% recount losses of more than €50 million in a given year. • Nonetheless, around 4% of organisations report losses of more than €11 million due to incidents involving their supply chain in a given year. ** Source : BCI Report by Patrick Alcantara @ BCI
  22. 22. CONFIDENTIAL KEY FINDINGS #6 : SUPPLY CHAIN BUSINESS CONTINUITY RESULTS • On the complexity of global supply chains, with more than half of organisations on average reporting having >21 key suppliers (51.6%). • 9.3% of organisations surveyed had >100 key suppliers, whilst almost 5% of organisations surveyed had greater than 1,000. ** Source : BCI Report by Patrick Alcantara @ BCI • Only 8.1% of organisations on average report that they know of all of their suppliers’ BC arrangements (Figure 9). • Almost a quarter of organisations know less than 25% of their suppliers’ BC arrangements, making it a significant blind spot for operations, and opening them to risk.
  23. 23. CONFIDENTIAL KEY FINDINGS # 7 : SUPPLIER BUSINESS CONTINUITY INFO • A growing number of respondents have reported looking at evidence of alignment to a recognised standard (ie. ISO 22301) as a marker for supplier BC programmes. 39% of respondents indicated asking for this evidence in 2013 alone. • Respondents, on average, report checking a supplier’s BCM programme (37.2%), its appropriateness (35.6%) and it relevance (35.4%) to their firm’s needs (Figure 10). • These findings demonstrate the growing awareness about supply chain risks and the benefits of having a supplier BC programme in place ** Source : BCI Report by Patrick Alcantara @ BCI
  24. 24. CONFIDENTIAL PRESENTATION TAKEAWAYS … Intro to MBS New expectations from CPO Supply Chain Risk Overview Supply Chain Resilience Study – Key Findings Risk Management Frameworks and Industry examples Summary
  25. 25. CONFIDENTIAL EXAMPLE OF A SUPPLY CHAIN SOCIAL COMPLIANCE Challenges and Requirements • Increasing complexity around managing its global supply chain • Streamline social compliance management processes and supplier audits across their extended global enterprise Benefits Realized • Supply chain Social Compliance solution improves visibility into the full gamut of their compliance initiatives • Supplier/Licensee qualification, annual re-qualification, contract management, maintain registration information and third party auditsEnsures ethical sourcing and compliance with rules, regulations, and standards One of the Leading Retail Chains • Social Compliance Solution across supply chain to help manage socially responsible product sourcing • Integrated approach to automate and manage supplier information, policies, audits, corrective action and remediation and supplier partner certification
  26. 26. CONFIDENTIAL One of the World’s Largest Financial Institution • Global roll-out of risk-based Supplier Audit solution across all business units & functions • Integrates vendor audit planning, execution and reporting across global operations • Improve collaboration and deliver significant cost savings for the audit group One of the World’s Largest social networking site • Comprehensive supplier risk, compliance and policy management solution • IT risk assessments, streamlined compliance requirements, automated control testing, security data integration SELECTED CASE STUDIES USING SUPPLIER RISK MANAGEMENT AUDIT PROGRAMS Upstream Oil & Gas company • Supplier risk and audit mgmt: At source inspections/audits of equipment for construction projects • Compliance with NEB –National Energy Board (Planned) Canadian regulatory agency
  27. 27. CONFIDENTIAL SUPPLY CHAIN RISK MANAGEMENT PROGRAM TYPICAL VS “BEST IN CLASS”
  28. 28. CONFIDENTIAL ISO 22301 IS THE SPECIFICATION DOCUMENT FOR THE NEWLY PUBLISHED INTERNATIONAL STANDARD ON SOCIETAL SECURITY – BUSINESS CONTINUITY MANAGEMENT SYSTEMS
  29. 29. CONFIDENTIAL RISK MANAGEMENT FRAMEWORK & ISO 31000 ESTABLISH THE CONTEXT RISK IDENTIFICATION RISK ANALYSIS RISK EVALUATION RISK TREATMENT COMMUNICATIONANDCONSULTATION MONITORINGANDREVIEW ISO 31000:2009 Risk Management – Principles and Guidelines 1. Vulnerability assessment 2. Mitigation planning & implementation 3. Ongoing Monitoring & Measurement 4. Crisis Management 5. Emergency Response SCRLC, 2011SCRLC, 2011
  30. 30. CONFIDENTIAL PRESENTATION TAKEAWAYS … Intro to MBS New expectations from CPO Supply Chain Risk Overview Supply Chain Resilience Study – Key Findings Risk Management Frameworks and Industry examples Summary
  31. 31. CONFIDENTIAL REFERENCES : • 5th Annual Survey, Supply Chain Resilience 2013 – An international survey to consider the origin, causes and consequences of supply chain disruption – Published November 2013 • Business Continuity Institute “SUPPLY CHAIN RESILIENCE TRENDS 2009-2013 SURVEYS”, Patrick Alcantara is a Research Associate for the Business Continuity Institute (BCI
  32. 32. CONFIDENTIAL Thank You …  Questions? Peter Woon Marina Bay Sands Pte Ltd Peter.woon@marinabaysands.com © 2012 Marina Bay Sands PTE LTD

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